Quck background question (financial)

[Gibbmusic]

Hello all,
I'm currently in the top secret clearance process with a federal agency and I have a quick question. I have an excellent credit record with a high score and no delinquencies at all on my credit report. I'm not sweating the financial part at all, however I'm thinking of taking out a 401k loan to finish up my private pilot training quickly. Does anybody know if this could potentially affect my background? Will they frown upon me taking out a $8k loan even though my credit history is flawless?

Just wondering,
Gibbmusic

[mjhoyt27]

Hello all,
I'm currently in the top secret clearance process with a federal agency and I have a quick question. I have an excellent credit record with a high score and no delinquencies at all on my credit report. I'm not sweating the financial part at all, however I'm thinking of taking out a 401k loan to finish up my private pilot training quickly. Does anybody know if this could potentially affect my background? Will they frown upon me taking out a $8k loan even though my credit history is flawless?

Just wondering,
Gibbmusic

I have a TS/SCI clearance, and if your credit is good then it won't be an issue. The only way this would be an issue, is if the 8k effects your debt to income ratio really bad (which I'm sure that isn't the case). They only care about people spending more than they can afford, because that would make them a possible target for bribery.

[Gibbmusic]

I don't even think it would affect my debt-to-income ratio since I'm borrowing from my own 401k account, but I may be wrong. Either way it shouldn't make a big difference there. The only debts I have is my house and my truck (which is almost paid off), I don't have a lick of credit card or revolving credit debt.

My only concern would be that they would see the 8k loan and think I was in some kind of financial crisis where I was having to borrow money. I would hope that they would call and ask why I borrowed it if it was an issue.

Thanks for the input,
Gibbmusic

[kc12]

Even if your spending close to your income level on paying your bills, as long as you are not late the government won't raise an eyebrow. As soon as you start making late payments they start becoming a little curious. Your $8000 loan probably is not going to be a big deal. This is a security clearance not a mortgage.

[Gibbmusic]

Great news! Thanks guys, I'll be taking out my loan next week so I can finish up my private pilot license.

Gibbmusic

[GR217]

I would caution you to borrow against your 401K, not because it will negative affect your credit/security clearance, but because it's a bad idea. That loan must be paid in full before you leave that job, such as quit for another job, laid off, etc.... Or else it will be considered an early withdrawl from a retirment account. An early withdrawl normal has severe fees and taxes that total around 50%. By the way I am completing my private pilot's license right now, so I did not want you to think I was anti-flying in anyway. I know it's pricey but I would suggest paying cash as go. Just my humble .02 though. Good luck with the job and flying.

[Gibbmusic]

GR, that thought crossed my mind about leaving before it was paid off. I figured that worst case scenario I could take out a personal loan to pay off the 401k if that happened. I know that sounds kind of backwards, but the APR on personal loans are quite a bit higher than my 401k loan offers and I'm paying the interest back to myself. Before I take the leap I'm going to talk to my 401k adviser and my bank to see which may be the smarter route.

Thanks for the input,
Gibbmusic